ISLAMABAD – Pakistan has asked the International Monetary Fund (IMF) for a cut in Federal Board of Revenue (FBR)’s collection target from Rs5.9 trillion to Rs5.5 trillion for the upcoming budget due to the third wave of coronavirus in the country.
The IMF had given the FBR the tax collection target of Rs5,963 billion for the upcoming budget 2021-22 against a downward revised target of Rs4,691 billion for the outgoing fiscal year in its latest staff report released after completion of the second to fifth reviews under $6 billion Extended Fund Facility (EFF) for Pakistan.
But Pakistani authorities are arguing that there is a huge gap between the IMF’s envisaged target and potential of FBR to fix the next fiscal year’s target.
FBR’s tax revenues could go up to Rs5,287.5 billion with nominal growth of 12% to 12.5% on the basis of revised tax collection of Rs4,700 billion for the outgoing fiscal year.
With an improved administration and effective enforcement, the FBR could maximum increase its collection up to Rs200 billion, so the FBR could collect Rs5.5 trillion.
What does IMF want?
The IMF wants Pakistan to achieve key fiscal objective through broadening the tax base, reduce informality, and simplify and modernize the tax system.
FBR plans to introduce a high-quality tax reforms package to address this in the FY2022 budget (of about 0.7% of GDP), based on the recommendations of previously provided technical assistance.
IMF resident chief in Pakistan Daban Teresa Sanchez said they are ready to support Pakistan navigate the difficult COVID-19 crisis while ensuring the objective of debt sustainability and strong and sustainable growth.
